The Indian Medical Devices Sector: The Need of the Hour

The Indian Medical Devices Sector is worth approximately USD 3 Billion and is growing at a CAGR of 15%. The Indian Medical Devices Market is dominated by imported products, including products manufactured using imported material, which comprises approximately 75% of the total sales. The domestic companies are largely involved in manufacturing low-end products for local and international consumption. However, lately many multinational companies have established local presence in India. While the Indian Medical Devices Sector offers an unrivalled investment and business opportunity, there are certain regulations that play a significant role for the industry in general. The Indian Medical Devices Industry is, currently, facing a few legal challenges. For example, the regulatory framework in India applicable to Medical Devices is still inadequate. At present, only 14 types of Medical Devices are regulated. The rest is unregulated.

Foreign Direct Investment (FDI) into an existing company engaged in the activity of manufacturing Medical Devices does not require prior Government approval. Certain laws, such as the Foreign Exchange Regulations and the Tax Statutes, can directly affect the ability of a foreign investor to invest and draw out returns, and thus determine the degree of profitability. The application of these laws to the investment or business must be examined in detail. Indian consumer mindset and local business practices are unique, and must be carefully studied while investing or developing a business model.

On a positive note, the Indian Government has introduced various fiscal measures to promote research, development, manufacturing and import of Medical Devices. There is no import duty on certain medical equipment. Similarly, a number of lifesaving medical equipment is exempt from payment of excise duty. The Indian Government has incentivized scientific research and development by providing weighted deduction. Thus, at present, the Indian Medical Devices Market presents a challenging yet exciting opportunity to foreign and domestic players alike.

The sector is, at present, growing at an approximate Compound Annual Growth Rate (“CAGR”) of 15% for a plethora of reasons. A significant percentage of purchasers of Medical Devices are private medical institutions and hospitals. Due to increased competition in tier I cities, private enterprises have started to focus on tier II and tier III cities, a market which has, until now, been untapped in India. As private enterprises expand in lesser explored markets, the demand for Medical Devices will expand proportionally. Other reasons for strong growth prospects of the industry are:

The Indian Medical Devices sector continues its upward march of growth and is strongly supported by India’s robust legal framework. The regulatory framework, though, is under-developed and poses a challenge. A new regulatory regime is the need of the hour. The new Government, at the center, has shown promise and it is likely that a new law that will overhaul the regulatory framework applicable to Medical Devices may soon see the light of day. The market, which was until now dominated by imported Medical Devices, may face fierce competition from domestically manufactured devices as many multi-nationals too have started shop locally. Thus, the sector presents an exciting investment opportunity to the players within India as well as outside.

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